Your investments: Yair Lapid, Ricki Cohen, and real estate

Government involvement has actually led to all these problems. The real answer is to get government out of the picture.

By AARON KATSMAN
April 4, 2013 04:07
4 minute read.
The grounds of the Hebrew University of Jerusalem.

Hebrew U 370. (photo credit: Courtesy of the Hebrew University)

The big news of the week has been the new finance minister, Yair Lapid, shooting off his mouth, or should I say his keyboard, in his highly controversial comments about “Mrs. Ricki Cohen” from Hadera. His political enemies have been quick to jump all over him for his definition of the middle class.

As a refresher, Lapid posted on Facebook how the Finance Ministry needs to help Mrs. Cohen; i.e., families earning a little over NIS 20,000 (about $5,800) a month, who own an apartment and travel abroad twice a year, but have no chance of purchasing an apartment in the future for one of their three children. His enemies have accused Lapid of totally being cut off from the general Israeli public, as families living on NIS 20,000 a month are considered to be upper class. They contend that those in real need of help are couples who bring in NIS 10,000 to NIS 15,000 a month and that the government has forgotten about them.

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My criticism is based in his magia li (I deserve it) attitude that few people seem to be questioning. Why on earth do parents have to buy an apartment for one of their three children? What kind of right is that? And if parents believe that is a value and want to help their kids, maybe they should stop traveling abroad with the whole family twice a year and save that money instead. Let’s just say that those those jaunts abroad cost the Cohens $15,000 a year. Well if they would save that money they would have enough for a down payment on one of their kids apartments in five to six years.

Not a huge sacrifice.

The real problem is that everyone – including Lapid, Shelly Yacimovich and Mrs. Cohen herself – believes that the solution to their problems lies in the hand of government.

Government involvement has actually led to all these problems. The real answer is to get government out of the picture. Free up land, encourage entrepreneurship by lowering taxes and cutting the endless amount of red tape, as well allowing competition are the way to help the middle and lower class.

As I have mentioned here numerous times, the way to solve the budget crisis is not by raising taxes; it’s by cutting spending, limiting government and having actual economic growth. By growing the Israeli economy more people will have good-paying jobs, they will pay into the system and government revenues will increase. It’s not some kind of magic; it’s just plain common sense.

Jerusalem real estate

You may be wondering what any of this has to do with Jerusalem real estate. Well, an article on Ynet this week mentioned a law that was passed by the Jerusalem Municipality to tackle both the affordability of apartments for young couples and the “problem” of apartments owned by foreigners that sit empty for most of the year. The law requires owners of vacant apartments to pay twice the amount of arnona (municipal tax) if they don’t rent out their apartment during the period of the year that they are not living in their apartment. The law’s authors believe this will force owners to sell, thus freeing up apartments for young buyers. Very noble.

And very naive. Aside from the moral issues of telling someone what they should or shouldn’t do with their very own property, how on earth is this going to solve the problem? No. 1: If you owned an apartment that you use two to three weeks a year and is worth a minimum of $750,000 and probably worth over a $1,000,000, would you rent it out to some students so that you can make NIS 6,000 a month and run the risk they will trash it? Would you suddenly consider selling if you have to pay an extra NIS 10,000 a year of arnona tax? No. 2: What young couple is going to be able to afford one of these apartments that is worth a million dollars? And if they can afford it, what are they doing complaining that there is a shortage of affordable housing? This law, like most laws, is completely useless and does nothing to try and help the plight of those who need help. It’s rather ironic that the supporters of this law were opposed to the Safdie plan that would have created tens of thousands of new housing units in western Jerusalem but opposed it for environmental reasons.

They are the ones who caused the housing crisis in Jerusalem, and this is their big solution? The real solution is for citizens to stop looking to politicians for help and for politicians to get out of the way, unshackle the economy and let it flourish. After all, I am sure Mrs. Cohen knows how to spend her money much better than Yair Lapid. Just give her the chance.

aaron@lighthousecapital.co.il

Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.


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